Human and social capital and ethnically diverse founding teams in high-tech industries

Abstract This paper investigates the impact of ethnicity within founding teams of high-tech ventures and asks whether such diversity confers advantages or disadvantages. Drawing on theories of human and social capital, we aim to illuminate the potential benefits of ethnic diversity in founding teams, with a particular focus on the roles played by ethnic and industry contexts. Our analysis encompasses data from 1,217 Israeli high-tech ventures operating between 1996 and 2015, spanning two key industries: life sciences (LS) and information technology (IT). We systematically evaluate the characteristics of these ventures across various dimensions of human and social capital, comparing those with ethnically diversity founding teams—including both Jewish and Arab members—with those characterized by ethnically homogeneous teams. Our findings indicate that ventures with diversity teams generally achieve higher values across most measured variables, particularly within the LS industry. However, ventures with exclusively Jewish founding teams maintain an edge in variables related to fundraising across both industries. Our study concludes that ethnically diverse founding teams benefit significantly from the bonding and bridging knowledge networks they establish, which are particularly enhanced by higher education within the life sciences sector. Additionally, founders’ human and social capital contribute to the development of expansive networks that foster knowledge, capabilities, and expertise across diverse domains. We discuss the implications of these findings and suggest directions for future research in this evolving field.